Law

Cross-collateralization can create problems

Article Abstract:

The cross-collateralization of mortgages which usually occurs in securitized lending transactions involving different limited partnerships can create creditors' rights problems. Mortgages resulting in cross-collateral guarantees constitute transfers. Unsecured creditors in these situations are protected by provisions in the Uniform Fraudulent Transfer Act, the Uniform Fraudulent Conveyance Act and the federal Bankruptcy Code which make transfers by a financially impaired entity for less than 'reasonably equivalent value' voidable.

Lenders hurt by diverse treatment of collateral: uniformity is urged in perfecting security interests in copyrights, trademarks and patents

Article Abstract:

The lack of uniformity in the court treatment of secured interests in copyrights, patents and trademarks has caused difficulty for lenders when they attempt to collect from bankrupt borrowers. Some courts have held that a Uniform Commercial Code (UCC) filing is enough while others have required a Patent and Trade Office filing. Therefore, a reform proposal under UCC article 9 attempts to resolve some of the problems through establishing that a UCC filing is adequate among other issues.

Handling trademarks as collateral

Article Abstract:

Intellectual property rights now encompass new technologies and computer applications and they may constitute most of a company's security interest when it seeks out a loan. A creditor must follow the filing scheme in Uniform Commercial Code Article 9 in order to have a security interest in a trademark. If the debtor business defaults on the loan, the trademarks can be sold to cover the debt.